Six Flags Gains Ground Under Redskins' Snyder

Last week's smoking ban was more like a smoke signal. It was Snyder's way of letting people know that he intends to make the parks more "family friendly." It's not the moms and dads having a cigarette while waiting in line to take the kids on the roller coaster that he wants to get rid of; it's the young adults who hang out in packs, puffing.

As Washington Post staff writer Annys Shin has reported, Snyder has brought in new managers, hired a new advertising agency and apparently fired that strange little dancing man who appeared in Six Flags television commercials.

Two of Snyder's key moves have been to dispatch scouts on key missions -- to find licensing opportunities in the theme parks and to see how much unused real estate under and around the parks can be sold.

Savvy as he is, Snyder understands that you don't just sell cokes to the crowd, you sell Coca-Cola Co. (or PepsiCo Inc.) the right to be the Official Soft Drink of Six Flags. That's good for a few million bucks a year, and there are lots of other possibilities. Snyder's marketeers are said to be talking to Pizza Hut and Papa John's about becoming the Official Pizza of Six Flags.

You can bet that if Six Flags starts announcing more licensing deals, investors will hang on every news release.

Cleaning up the operation of what was generally regarded as a not-very-well-run company is one part of Snyder's Six Flags strategy.

The other part is restructuring the company's finances.

As the Bear Stearns analysts said, Snyder's takeover of Six Flags is "like an LBO without the BO."

In an LBO, or leveraged buyout, you borrow a lot of money -- that's the leverage -- to buy out a company. But Snyder didn't have to buy out Six Flags; he only offered to. And his offer last summer was just $6.50 a share. Six Flags executives said at the time that was a low-ball bid. With the stock trading today over $10, it's clear they were right.

Snyder essentially set a floor under the price of Six Flags stock by promising that if it fell below $6.50, he'd buy a big batch of it. That maneuver made the company a much more attractive investment, limiting investors' risk.

To many Six Flags investors, that guarantee alone was good reason to side with Snyder and vote to have him and his team take over the management of the business.

The debt that usually goes along with an LBO was already there -- $2.1 billion dollars' worth. Six Flags has so much debt, in fact, that it would have been difficult to do an LBO because the company couldn't generate enough profit to pay the interest.